Prop. 103 Author Harvey Rosenfield Will Make Announcement Later this Week

Santa Monica, CA — Flouting the state constitution and numerous court decisions, California Governor Gray Davis has signed SB 841 (Perata), legislation sponsored by some of Davis’s largest campaign contributors which will increase auto insurance premiums and increase the number of uninsured motorists, in violation of voter approved Proposition 103.

Davis vetoed the same legislation last year after a public controversy erupted during his reelection campaign when the legislation’s lead sponsor, Los Angeles-based Mercury Insurance Company, gave Davis $25,000 when the bill got to his desk. Mercury has donated a total of $1.2 million to state lawmakers since 2001, as well as $220,000 to Governor Davis since 1999.

Harvey Rosenfield, author of Proposition 103 and President of the Foundation for Taxpayer and Consumer Rights, said, “Governor Davis has sold out California voters on behalf of Mercury Insurance and other insurance companies that have been among his biggest donors. The bill symbolizes the pervasive corruption of California’s democracy that voters are sick and tired of. As we have in the past, we will go to court immediately to have this unconstitutional law invalidated. However, I will have a further announcement regarding Gray Davis later this week.”

Bill Backed By Mercury, Other Insurance Companies

SB 841 is one of the highly controversial “pay or play” bills. To grease the bill’s passage last year, Mercury donated over $1 million to 62% of state lawmakers, including $25,000 to the bill’s author Don Perata just before Mercury legislation was heard in the Senate Committee last year and another $25,000 to Gov. Davis after the bill arrived at his desk. Since then, Mercury has donated $200,000 more to state lawmakers.

Davis vetoed the legislation last year because “it violates the intent of Proposition 103.” Davis now says that the legislation “furthers the purposes” of 103.

Insurance Code section 1861.02(c), approved by voters in 1988, states that: “the absence of prior automobile insurance coverage, in and of itself, shall not be a criterion for determining eligibility for a Good Driver Discount policy, or generally for automobile rates, premiums or insurability.” Brazen violations of the law by Mercury and others insurers led Insurance Commissioner Harry Low — appointed by Davis to fill Quackenbush‘s term — to order insurers to obey the law. Mercury has been sued for violating this provision of Proposition 103. FTCR has sued Auto Club, Safeco and GEICO for similar violations.

Mercury, 21st Century and other supporters of the bill seek to escape legal accountability for their conduct in violation of Prop. 103.

FTCR Will Sue to Void Law

The California Constitution protects voter initiatives against hostile amendments. Consumer advocates with FTCR have twice filed suit to void the enactment of laws that violate Proposition 103, on the grounds that the legislative amendments do not “further the purposes of the initiative.” In both cases — Amwest v.Wilson (a unanimous Supreme Court decision) and Proposition 103 Enforcement Project v. Quackenbush — they prevailed and the law was overturned. “It was the insurance industry’s corrupt control of the legislature that forced the voters to go to the ballot box in 1988; now, the insurance industry, led by Mercury Insurance, is corrupting the democratic process by subverting the will of the voters. The Foundation for Taxpayer and Consumer Rights (FTCR) will file a lawsuit to bar SB 841 from taking effect.”

-30-